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Factor Conditions

More than one condition needs to be gathered for the organization to be competitive. First of all, they need to be connected to different formation centers and universities. As such, they know they have skilled labor that companies can hire as soon as they graduate, as to avoid the brain drain. Those are created factors, they are not inherited, and they make a major part of why the organization is successful. There is a big concentration of different programs and universities in this cluster, and because they are in the education sector, they bring in new recruits and educated and skilled labor in their fields. They have Grandes Écoles in their members, those are highly specialized and highly competitive. Some of the biggest and most important schools and higher education faculties of France are part of the cluster. For example, every university in Paris, les Gobelins, l'École Polytechnique, Sciences Po, l'Institut George Méliès, l'ENS, and more. They can afford to be leading the industry and investing in research. Moreover, their geographical position is a big factor that helps them. Being in Paris makes them in the center of Europe, and in a very competitive and innovative city. Moreover, they receive funds from Europe and France which strengthen their place and their role. Also, because they are part of France they already had a basis of funding and technology. Indeed, there are a multitude of industries where digital technologies are essential parts of the way they work, and a lot of those industries are already existing in France. Even if their members headquarters are all over France, the fact that the headquarter of Cap Digital is in Paris is a big bonus. Plus, their options to internationalize is more important and more realistic if they are in Paris as it is an important international hub already. They also receive capital for research and development so that they can innovate. They invested €1.6 Billions in R&D. Those investments are not fruitless either as 750 of their R&D projects were labelled. Added to that, the fact that this cluster gather both SMEs and big businesses makes it an asset for the cluster as they can all gain from this collaboration. Cap Digital has multiple factors that make them the biggest cluster of digital technologies in Europe, and a lot of them are due to those factors : formation, location, and funds.

Demand Conditions

The Demand Conditions in Europe are high, especially in Western Europe. They are developed countries who can focus their economies on consumption and on having a higher standard of living. Cap Digital is both a digital technology cluster, but also a sustainable development cluster as they integrated Advancity within Cap Digital. As such, they are able to claim a leading position in both the digital industry in Europe and the sustainable urban development. Moreover, ecology, and as such making the cities and urban landscapes more environmentally friendly, is an important focus in European affairs. Indeed, the environment is a concern and European countries want to make sure that ecology and sustainable development is part of their future. It is a stake that all countries seem to be in agreement with if we can refer to the signature of the Paris Accords in 2015 which has the majority of the world's countries signing or being willing to sign it. The European Union also has projects to make the EU be the leader of sustainable development and sustainable energy in the near future. As such, Cap Digital's role in research and development in the sustainable area are making them stand out and be on the front line, which helps their competitiveness. There are also national laws that aim to make cities more sustainable. As such, there is a high demand for alternative means of energy and any way to make the city more environmentally friendly. Furthermore, everything digital is central in today's world. We are more and more connected, and more and more offers are available online. Technology is evolving very fast and there are more and more innovations, as such there is always a need for research and development to stay up to date and relevant, or even to stay ahead. Innovation in technology is also central in eHealth, AI and media. As there are quite a few actors who are in those industries and as such they take part in the collaboration to innovation, which makes the whole cluster stronger. There is also the fact that part of French culture is in the entertainment and media industries, as such innovating and answering the demand is making this cluster relevant. Moreover, big names of medias are part of this cluster, such as AFP and France Télévisions. Projects need to be delivered and those need to be game changers to attract financing and to attract more demand from both the local and international markets.

Related and Supporting industries

There are different Related and Supporting Industries that make this cluster an actual competitive cluster, and part of it is the government's help. Banks are also part of the cluster and make it more global and competitive. For example, BNP Paribas, Crédit Agricole, La Banque Postale, HSBC France, and Banque Populaire are part of the Cap Digital Cluster. Moreover, the founding members are, for some, part of big industries or big companies. Some of them are Orange, Editis, INA, which are big national companies. There is a big link between the cluster, education, research and the French and European institutions. Part of its importance is, of course, due to chance, as establishing yourself as such a big cluster in this area is difficult. They started twelve years ago and are based in Paris. As such, they are in a big city and in a place that is good to receive funds and helps related to technology. The fact that some of their founding members were big companies like Orange, or public companies like INA, or even education center like Université Paris 8 Saint Denis helped them get established as a hub. They became the biggest digital cluster in Europe, as well as the biggest digital innovation cluster in Europe. Moreover, the fact that there is competition and pressure to innovate makes it sure that they have a sustainable competitive advantage.  "It often takes more than a decade for an industry to create competitive advantage" (Porter, 1990). It is also important to underline that the three main legs on which innovation centers stand on are the enterprises, research and development, and formation (Arzeni, Rousseau, Veltz, Verdier, 2008). And that's how centers become clusters as they improve and invest more and more.

Government

We also have to take into account the paradox of the French State. Indeed, it wants to decentralize, but it still is the only actor that could make sure this project would exist to the extent it did, as one of the biggest players. Once again, we have to underline that multiple actors, especially regional government or government agencies, have their say in those projects. This puts down the problem of time as the State want quick results but there needs to be time spent to make sure the project is both stable and doable. The fact that multiple agencies have to work on it as well shows that time is a big constraint. Those agencies also have different missions and goals, which complicate everything, as the organization has to answer to those agencies. Moreover, the creation of those innovation centers is more of bottom-up type of creation (Arzeni, Rousseau, Veltz, Verdier, 2008). As such, the State doesn't have that much of an influence on the way or where it is created, even though it can still help by providing the small push in the direction of the creation of a cluster. There are also multiple national and supranational helps. For example, Cap Digital is part of the innovation center, a French government list of competitive hubs, there are help by multiple regional agencies, the DGE (Direction Générale des Entreprises) a French government agency that takes care of all enterprises, and they receive European funds as well. The government puts regulation, as seen by the numbers of government agencies that Cap Digital has to answer to.

Strategic Issues

Cap Digital works thanks to a partnership of both the private and public sectors, as such funds are necessary to run the organization and support the members in their endeavors. So, the first, and principal issue emerging concerns the finances. They have more than 1000 members, of which the majority are SMEs, as said previously. Thus, they face unique and specific challenges to their growth and means of innovation. The failures of SMEs are due to multiple factors such as undercapitalization, short-term liquidity problems, Insufficient working capital, insufficient startup capital, and poor financial management (Larsen, Lewis, 2008). Small and Medium Enterprises need funds to function, as they are small and do not generate enough capital for them to work sustainably for long periods of time. Especially in Europe, access to financing, be it loans or venture capital is particularly difficult, and SMEs in Cap Digital are still faced with this issue. They have to pay a membership fee, more or less important according to the size of the enterprise, or the type of organization. With that, they have access to some public funds, which amounts also vary depending on their needs and the help they receive already. One of the other advantages of their membership is the access for members to information, networks and resources to develop their projects. Donation and private financing are one the major way companies can receive financing. They want to promote innovation so that investors will be more inclined to funds the researches and developments of the numerous projects that the members have. Nevertheless, the lack of financing for the numerous enterprises and labs is detrimental and can be a problem, especially for the smallest enterprises and start-ups that do not have enough to stand on, and as such fail in the first few years of their creation. Moreover, according to the official numbers delivered by Cap Digital, of their €6.5 Millions that was their annual budget during the year 2017, €3.35M was made by private funds, €2.49M was made by public funds, and €0.39M was made by European funds. Cap Digital provides a cover and help, but the issue of financing is still present and still important. Plus, with the amount of public funds made part of the cluster they are not competitive enough. Even the R&D financing is mostly from the government. Indeed, out of €72.5M of the R&D budget, €34.8M were from public funds ("Cartographie des tendances 2018/2019", 2018). The government is investing too much, and it is one of the reason the cluster is not facing some issues.

Another issue they face is the lack of recognition of the collective efforts from the ecosystem and of the capacity to generate and stimulate entities together. Indeed, Cap Digital is active in six major industries, as presented before, Education and Formation, eHealth and wellbeing, Cultural and Creative industries, Smart cities and Sustainable development transition, Industry and Services, Technology and AI. As such, they want to have their members be leading in those industries and for them to innovate and change those industries. They have to demonstrate to the ecosystem the strength of thinking and building collectively for both its brand image and ensure the understanding of an organization of this kind, and to stimulate the innovation in general as it is the mission given by the government. Moreover, they face issues with the different entities, they struggle to make them create and innovate together. They also face a lack of recognition from the different entities, which affects their ecosystem and their productivity. Their lack of recognition makes it harder for them to be as competitive as they wish to be.

This leads to another issue, the fact that they are trying to improve is their competitivity, and their wish to be global leader in ecological transition and digital technologies. Indeed, center of excellence were made more than ten years ago thanks to a government policy. There are multiple phases and as of this year the centers will enter their fourth phase. The goal? To make France the most innovative country in Europe. As such, they need to change their thoughts and reaffirm some ambitions that were not as prominent in the last few years. They also have to rethink some societal and ecological as well as economical stakes. As such, they have to take into account a lot of different parameters in their different projects. They also have to make sure their projects can answer to the demands of consumers, with short-term economical strategies and long-term stakes such as the future of the planet, education, and the wellbeing of its inhabitants (Cap Digital, 2018). Moreover, they have to handle their different industries to get some sort of equilibrium. Especially since the major sector, the technologies sector, is the most important and from which the different market industries can find innovations that can make them leaders in their respective fields. They also have to face different challenges for the different industries (Cap Digital, 2018). As such, the coordination might be a problem, as well as the competitivity of the different actors.

Linked to this weakness in competitivity and organization, they end up having troubles in the level of their performance. Since the goal of Cap Digital is to build on synergies, innovative and collaborative projects, they have to develop abilities in functional areas if they are to hold positions of competitive advantages. They have to deal with dynamic and uncertain environment. They understand how changes in their competitive environments are going so they have to come up with new innovations, strategic abilities, adapt and seek improvement to be able to support their members which is time consuming. The longer the development timescale, the greater the risk. They must create and add value to their members if they want to succeed long term. They are also looking for other ways to improve their operational flexibility by opening new models and adoption of new technologies.

POLICY RECOMMENDATIONS

TALK ABT DISTRIBUTION OF FUNDS => LIKE MORE PRIVATE FUNDS AND LESS GOVT

Larsen, P., & Lewis, A. (2007). How award-winning SMEs Manage the barriers to innovation and innovation management. Vol 16 (2) 142 –151

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